HY Accounting Blog

How does a trust help?

A trust can be a great tool for providing financial security, wealth protection, and tax benefits. A trust is a legal entity that can help provide legal protection of assets, as well as tax benefits for the beneficiary of the trust. The trustee is responsible for managing and distributing the assets within the trust according to the trust deed. This allows individuals to protect their assets from creditors and other potential liabilities. Additionally, trusts also provide some additional flexibility to better help optimise your tax.

Overall, trusts offer many advantages and are an important tool in estate planning and asset protection. However, it’s important to understand that there are different types of trusts available and each has its own rules, advantages, and disadvantages.

5 potential benefits of setting up a trust

Five potential benefits and advantages of a trust include:

  • They can potentially provide tax advantages by allowing income, capital gains, and distributions to be taxed at lower rates than they would be taxed if the beneficiary held the assets directly.
  • Depending on the type of trust, you have the discretion to decide how your assets and investments will be managed and distributed after death or upon any other predetermined event.
  • It is possible for trustees to manage investments or property in order to maximize potential wealth-creation opportunities.
  • Distributions from the trust are flexible and can be tailored to meet the specific needs of individual beneficiaries.
  • Trusts can also protect your wealth from creditors in certain cases.

All of these potential benefits make setting up a trust an attractive option for those looking to protect their current and future assets.

What is the main purpose of trust?

The formation of a trust is a legal document, where one party, known as the trustee, holds legal title to assets on behalf of another party, known as the beneficiary. The main purpose of a trust is to protect your assets and provide a vehicle that you can use to build generational wealth. Trusts are commonly used to pass down assets or property to their children or grandchildren. They can also be used for tax planning, asset protection, and charitable giving. With a trust, the trustee has control over how the assets are invested and managed, while the beneficiaries have access to the funds when needed. They provide greater privacy than other methods of transferring wealth since they do not need to be reported in public records. Lastly, trusts can continue after death so that assets are protected for future generations.

Why do people use trusts?

Some of the main reasons that people use trusts are:

Protecting your Assets & Investments

It can provide an additional layer of legal protection by keeping the assets or investments out of the hands of creditors. Secondly, it can help ensure that the assets or investments remain intact and are not subject to potential losses due to mismanagement or other issues.

Asset Creation

A trust is an excellent vehicle to accumulate and build your diversified asset and investment portfolio while providing more control over how those assets are managed and distributed.

Tax Flexibility

The family trust is a commonly used vehicle that can be used to help you optimize your tax

Estate Planning

In the event you’re no longer around, a trust will survive even after your gone, and establishing a trust can help ensure that your assets are protected and your instructions are followed upon your passing. The trust also makes it easier to go through probate as the terms of the trust make it clear what is to happen in the event you pass away

What can trust help you achieve?

Ultimately, a trust fund can help you achieve your goals to both build and protect your assets and investments.

Imagine a bucket, and in this bucket, you hold all of your assets and investments. The wonderful thing about this bucket is that it’s almost locked away, meaning nobody can see it as it is private, and it becomes very difficult to take from it, as the assets held in the trust are protected. If you think of trust in this way, you can start to see just how powerful trust is and potentially why you need trust.

What is the difference between a will and a trust?

A will and a trust are both estate planning documents, but they have different purposes. A will is used to determine how assets should be distributed after death, while a trust is used to manage assets during life and after death.

A will is a legal document that goes into effect upon an individual’s passing, and it outlines the deceased person’s wishes for their property, investments, and other assets. On the other hand, a trust can be created to protect these assets before and after death; it can also be used to provide for minors or other beneficiaries.

TIP – it is possible to create trust as part of your will. These are called testamentary trusts

Both documents are important tools in estate planning; however, they serve specific purposes depending on an individual’s needs. It’s important to speak with an experienced lawyer and accountant before deciding which document will best address your estate planning goals.

Why You Should Set Up a Family Trust

A family trust (discretionary trust) is a great way to protect and manage your family’s assets for future generations. It offers flexibility to distribute income, optimise taxes, and use discretion in how the money is managed. By setting up the trust, you will be able to decide who the beneficiaries are, when they should receive money, and how much they will receive. This allows you to tailor the trust to fit your family’s needs. The trust can provide greater control over how your assets will be distributed as you can set conditions or restrictions on when or how beneficiaries can access funds in the trust, ensuring that your wishes are carried out even after you’re gone.

All of these benefits make setting up trust an excellent way to secure your future wealth.

What is the benefit of a Family Trust?

A family trust can be a powerful tool for managing and protecting your estate. It’s one of the most common forms of wealth and estate planning, used by many wealthy people to ensure their assets are protected and growing. There are several benefits to establishing a family trust, including flexibility, control over investments and tax advantages.

The first major benefit of setting up a this type of trust is is that it gives you a vehicle to build and protect your assets. You can specify how your money should be distributed among beneficiaries and when they should receive it. A trustee is appointed to manage the trust on behalf of its beneficiaries and must follow certain rules set out by the trust agreement.

What about setting us a family trust for a business?

While it is possible to have a business within a trust, it can create some additional unwanted complexities. One of the more common practices for the relationship between a business and a trust is for the business if it is operating as a company (Pty Ltd), to have its shares owned by the trust. In this way, profit from the business can be distributed to the trust, which then has the flexibility to distribute the trust income to the beneficiaries to ensure the most optimum tax outcome. The shares in the trading company become part of the trust assets, similar to any other type of asset.

Remember, before you consider whether this is right with you, make sure to speak with your accountant and solicitor who can provide tax or legal advice.

Is a trust right for you?

A trust can be a great way to manage your finances and provide for your family. Depending on the type of trust you create, it can offer tax advantages as well as asset protection. It is important to understand the different types of trusts available and determine which one would best suit your needs. Ultimately, if you want to secure your assets and plan for the future while benefiting from certain tax advantages, a trust may be right for you.